The government is planning to set up a non-formal public distribution system (PDS) to spruce up supplies of essential commodities to control prices.
“A scheme for strengthening non-formal PDS through state civil supplies’ corporations and consumers’ marketing federations is proposed to enable these agencies to effectively intervene in the market by increasing availability of commodities during periods of price increases,” the finance ministry said on Wednesday.
The scheme would involve providing non-plan assistance to these agencies subject to certain performance benchmarks, the details of which are being worked out.
The structure of the proposed non-formal PDS system has not yet been defined.
“These measures are aimed at increasing domestic availability and a consequent reduction in prices through improved supply management,” it said.
India’s annual inflation has reached a worrisome 12.44 per cent mark on the back of rising global commodity and crude oil prices, although the latter has shown signs of cooling off in recent days.
Macro-economic managers and monetary authorities are grappling with policy dilemmas as they struggle to contain prices and maintain high growth in national income in an election year.
The Reserve Bank of India (RBI) has launched an all-round monetary attack on inflation by raising key interest and reserve rates to reduce liquidity and aggregate demand.
“Fiscal measures may, however, gradually lead to increase in fiscal deficit which, in turn, may create inflationary tendencies,” the finance ministry said.
Revenue Secretary PV Bhide said the government might step up action against tax evaders to raise revenue collection and reduce fiscal deficit.
“The need for reducing high fiscal deficit, which initially arose to prevent crowding out investment, has become all the more important to control present inflation,” Bhide said at a meeting of business leaders organised by the Federation of Indian Chambers of Commerce and Industry.